'Delta', 'Alpha' Teams Provide Cover for 'Rogue' Traders - Outrage

These are the banking equivalents of special ops and when things go wrong, they are disavowed as "rogue traders."

NEW YORK ( TheStreet) -- It seems so obvious now. The reason banks use covert-sounding team names like the "Delta One" desk at UBS ( UBS) and the "Alpha" fund at Goldman Sachs ( GS) is because they really are trying to cover things up.

These are the banking equivalents of special forces. They are meant to operate in the shadows; no one is supposed to know much about them or what they do. When things go wrong, the teams are disavowed. They become "rogue traders" and their actions are decried as "unauthorized."

Officially, Delta and Alpha are financial terms referring to the change in price of a derivative versus its underlying asset and the risk-adjusted return on an investment, respectively. But that is clearly just a cover.

Over at UBS, the shadow operations of the Delta One desk exposed that many of the derivative games that caused the financial crisis are still being played in the shadows. Traders using the bank's funds seek to profit from small differences between a security like the Swiss franc and a derivative security like a currency ETF.

To make a big profit on these small differences, a sizable amount of the bank's money needs to be put at risk -- and in the UBS case we now know that one trader alone had put about $2 billion at risk and lost it.

While UBS is getting all the attention (that's what happens when an undercover operation is blown), it's actually a somewhat minor player among the banks with Delta One teams. Goldman Sachs is one of the biggest operatives, as you'd expect, according to a 2010 report by JPMorgan. France's Societe Generale and BNP Paribas are also in the game along with Credit Suisse ( CS)and Barclays ( BCS), according to JPMorgan.